By Steve Burkholder
The Financial Accounting Standards Board and its international counterpart voted to provide “transition relief” for companies that make changes to contracts before the date that the jointly written 2014 standards on revenue recognition become effective.The decision to develop “practical expedients” on revenue-generating customer contracts that are modified was carried out March 18 at a joint meeting of FASB and the International Accounting Standards Board.Contract-Modification Guidance FASB plans to issue a draft accounting standards update (ASU) on contract modifications that would allow a company to account for a modified contract by determining the transaction price at the contract modification adjustment date.In addition, the practical expedient would include having to perform a “single standalone selling price allocation (with the benefit of hindsight) that would include all satisfied and unsatisfied performance obligations in the contract from inception.”IASB opted for providing an expedient along the lines of FASB's transition relief on contract modifications, and to also permit what the boards label a “completed contracts” expedient.FASB Plans Two Proposals FASB plans to issue a draft accounting standards update in coming months to make companies' shifts to the revenue recognition easier with regard to contract modifications and three other aspects of the new rules discussed March 18:Noncash consideration;Gross-versus-net presentation of sales taxes; andCollectability.That proposal will be subject to 45-day comment period, FASB tentatively decided March 18.The U.S. board voted previously to publish a proposed ASU to aid transition to the new rules' provisions on two other issues: Licenses of intellectual property; andIdentifying performance obligations.The two items of planned guidance stem from meetings of the IASB-FASB Joint Transition Group for Revenue Recognition.Delay in Effective Date? The exact timing of the release of the two draft ASUs remains uncertain. A factor in the schedule for publication may be FASB's planned meeting in April on whether to delay the Jan. 1, 2017 effective date of the far-reaching revenue recognition standards.The revenue standards were issued by FASB and IASB last May.To contact the reporter on this story: Steve Burkholder in Norwalk, Conn., at
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